Date Published 21 April 2022
Landlords with leasehold property within their portfolio, as well as their advisors, will be aware of the difficulty and delay a short lease (90 years or less) can cause when it comes to selling a property.
90 years or less
Where a leasehold property has 85 years or less remaining, buyers are likely to struggle to be able to secure a mortgage.
Even where there are 86-90 years remaining, many buyers, despite not fully understanding the legal issues surrounding leases and leasehold property, appreciate that a lease of this length is something to be concerned about.
So what can you do if you are selling your apartment and your lease has fewer than 90 years left to run?
The ideal scenario of course is to extend your lease well in advance of putting a property on the market.
However, when you want to sell your property quickly and there is not enough time to complete the lease extension beforehand, there is a potential solution.
This solution is to tie the formal lease extension into the sale process.
With this option, you, as the seller, would serve the lease extension notice on the freeholder once contracts are exchanged. The sale contract will then deal with assigning the right to extend after the transaction is completed. The cost of the lease extension would be negotiated between the buyer and the seller.
By assigning the lease extension right as part of the sale process, the buyer does not have to wait for two years before exercising their right to extend the lease, which could be critical from a finance perspective.
It is imperative however to ensure that the mortgage lender understands the assignment and is willing to lend.
Some leaseholders may be tempted to go down the informal lease extension route for speed, but this will tend to be at the cost of the premium and, potentially, future ground rent commitments.
Additionally, it will be harder to secure a mortgage as the freeholder is not obliged to co-operate, and so the lease extension is not guaranteed.
For further advice on selling a leasehold, contact our experienced, licenced and regulated team of professionals.
